The day's action comes just weeks after the commission ordered PG&E to cease and desist from undermining efforts by the Marin Energy Authority to establish public power -- formally known as a Community Choice Aggregation, or CCA.
The decision applies to San Francisco, Marin and any local governments considering buying and selling their own electricity to the public.
By a 4-1 vote, the commission ordered PG&E to stop misleading consumers about public power. The utility has been sending out a barrage of mailers urging San Francisco residents to oppose a proposal by the city to buy and sell its own electricity.
The San Francisco Public Utility Commission petitioned its state counterpart for Thursday's ruling.
"The CPUC did part of what we asked for. They said you can't lie. Well, let's hope not," said Ed Harrington, the general manager of the SF PUC.
CPUC president wrote Thursday's decision against PG&E.
"They were soliciting people what's called opting out to get them out of the program and so forth in manners and ways that we had said they could not do. We also felt some of their newspaper and other advertising was misleading and incorrect," said Michael Peevey, the CPUC president.
CPUC Commissioner Timothy Simon was the lone dissenting vote against Thursday's measure.
"We are gag ordering an investor-owned utility, while the Community Choice Aggregator has no limited restrictions on their speech whatsoever," said Simon.
Right now, state law only allows the CCA to let consumers opt out of public power programs.
But PG&E was accused of illegally sending out its own "opt out" forms to customers -- urging them to stay with PG&E. Marin county launched the first CCA in the state just weeks ago. PG&E says it's ready to move forward.
"We will continue to work with the CPUC to ensure that there are balanced rules on both sides for all energy providers to ensure that our customers get the quality of service that they deserve," said Katie Romans, a PG&E spokesperson.
PG&E could very well get the last word. It's spending $35 million to pass Prop 16 -- a measure on the June ballot which president Peevey says will severely limit new pubic power programs around the state.